What is the anticipated impact on the company's debt‑to‑equity ratio and any covenants that may be triggered by this issuance?

Impact on the capital‑structure metrics

The $300 million private placement of 2.5 % convertible senior notes (plus a possible $45 million “up‑side” option) will add a comparable amount of senior debt to Intuitive Machines’ balance sheet immediately. Assuming the company’s current equity value remains roughly unchanged, the debt‑to‑equity (D/E) ratio will rise proportionally – roughly a 30 %‑40 % increase in total debt on a static equity base. Because the notes are convertible, the long‑run leverage profile is likely to be lower than the headline‑debt figure: if and when the notes are converted into common stock (the 2.5 % coupon makes conversion attractive if the underlying equity price appreciates above the conversion price), the “effective” D/E will fall as the debt is swapped for equity. In the short term, however, analysts and credit agencies will treat the full $300‑$345 million as outstanding debt, tightening the company’s leverage ratios.

Potential covenant ramifications

Most mid‑cap issuers of senior notes embed a net‑leverage covenant (senior debt / adjusted EBITDA) and a minimum net‑worth or equity‑cushion test. By adding ~ $300 million of senior debt, Intuitive Machines could push its net‑leverage ratio close to – or above – any pre‑set covenant ceiling (e.g., 4.0× EBITDA is a common benchmark). If the covenant is breached, the company would be forced to either:

1. Accelerate repayments or redeem the notes (often at a make‑whole premium),
   
2. Restrict further capital‑expenditure, asset‑sale, or dividend‑payment activity, or
   
3. Seek a waiver from lenders, which may come with higher interest spreads or tighter reporting.
   

Because the notes carry a low 2.5 % coupon, the market perceives the capital‑raising cost as modest, but any covenant breach would likely be priced in as a credit‑risk premium and could pressure the stock lower until a waiver or conversion plan is announced.

Trading take‑away

• Watch leverage metrics: Monitor quarterly net‑leverage and EBITDA reports. A breach of the covenant threshold will trigger a short‑term sell‑off in LUNR and a widening of the note spread.
  
• Conversion catalyst: A sustained rally in LUNR’s equity price could make conversion economical, effectively deleveraging the balance sheet and unlocking upside.
  
• Positioning: In a neutral‑to‑bullish market, a long position in the stock with a stop near the current covenant‑breach risk level (e.g., 5‑6 % below the last close) can capture upside while limiting downside if a covenant‑waiver scenario materialises. Conversely, a short‑or‑protective‑put position may be justified if the company’s EBITDA outlook is weak and the added debt threatens a covenant breach.